Exhibit
10.20


 


RESACA EXPLOITATION, INC.


 


INCENTIVE
STOCK OPTION AGREEMENT


 


Optionee:  Dennis Hammond


 


1.                                      Grant
of Stock Option.  As of the Grant Date (identified in
Section 20 below), Resaca Exploitation, Inc., a Texas corporation (the “Company”), hereby grants
an Incentive Stock Option (the “Option”) to the Optionee (identified
above), an Employee of the Company, to purchase the number of shares of the
Company’s common stock, $0.01 par value per share (the “Common
Stock”) identified in Section 20 below (the “Shares”), subject to
the terms and conditions of this agreement (the “Agreement”) and the Resaca
Exploitation, Inc. 2008 Stock Incentive Plan (the “Plan”).  The Plan is hereby incorporated herein in its
entirety by reference.  The Shares, when
issued to Optionee upon the exercise of the Option, shall be fully paid and
nonassessable.  The Option is an “incentive
stock option” as defined in Section 422 of the Internal Revenue Code.


 


2.                                      Definitions.                                All capitalized
terms used herein shall have the meanings set forth in the Plan unless
otherwise provided herein. Section 20 below sets forth meanings for
various capitalized terms used in this Agreement.


 


3.                                      Option
Term.  The Option
shall commence on the Grant Date (identified in Section 20 below) and
terminate on the date immediately prior to the eighth (8th) anniversary of the Grant
Date.  The period during which the Option
is in effect and may be exercised is referred to herein as the “Option
Period”.


 


4.                                      Option
Price.  The Option
Price per Share is identified in Section 20 below.


 


5.                                      Vesting.  The total number of Shares
subject to this Option shall vest in accordance with the Vesting
Schedule (identified in Section 20 below).  The Shares may be purchased at any time after
they become vested, in whole or in part, during the Option Period; provided,
however, the Option may only be exercisable to acquire whole Shares.  The right of exercise provided herein shall
be cumulative so that if the Option is not exercised to the maximum extent
permissible after vesting, the vested portion of the Option shall be
exercisable, in whole or in part, at any time during the Option Period.


 


6.                                      Method
of Exercise.  The Option is exercisable by delivery of a
written notice to the Secretary of the Company, signed by the Optionee, specifying
the number of Shares to be acquired on, and the effective date of, such
exercise.  The Optionee may withdraw
notice of exercise of this Option, in writing, at any time prior to the close
of business on the business day preceding the proposed exercise date.


 


7.                                      Method
of Payment.  The Option Price upon exercise of the Option
shall be payable to the Company in full either: (i) in cash or its equivalent; (ii)
subject to prior approval by the Committee in its discretion, by tendering
previously acquired shares of Common Stock 


 

















 


having an aggregate Fair Market Value (as defined in the Plan) at the
time of exercise equal to the total Option Price; (iii) subject to prior
approval by the Committee in its discretion, by withholding shares which
otherwise would be acquired on exercise having an aggregate Fair Market Value
at the time of exercise equal to the total Option Price; or (iv) any other
permitted method pursuant to the applicable terms and conditions of the Plan.


 


As soon as practicable after receipt of a
written notification of exercise and full payment, the Company shall deliver to
or on behalf of the Optionee, in the name of the Optionee or other appropriate
recipient, Share certificates for the number of Shares purchased under the
Option.  Such delivery shall be effected
for all purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to Optionee or
other appropriate recipient.


 


8.                                      Restrictions
on Exercise.  The Option may
not be exercised if the issuance of such Shares or the method of payment of the
consideration for such Shares would constitute a violation of any applicable
federal or state securities or other laws or regulations, or any rules or
regulations of any stock exchange on which the Common Stock is listed.  In addition, Optionee understands and agrees
that the Option cannot be exercised if the Company determines that such
exercise, at the time of such exercise, will be in violation of the Company’s
insider trading policy.


 


9.                                      Termination
of Service.  Voluntary or
involuntary Termination of Service shall affect Optionee’s rights under the
Option as follows:


 


(a)                                  Termination for
Cause.  The unvested portion of the
Option shall expire on the date of Termination of Service and shall not be
exercisable to any extent if Optionee’s Employment is terminated for Cause (as
defined in the Plan at the time of such termination).  The vested portion of the Option shall expire
to the extent not exercised before the thirty (30) day anniversary of the
termination date.  In no event may the
Option be exercised by anyone after the earlier of (i) the expiration of the
Option Period or (ii) thirty (30) days from the termination date.


 


(b)                                 Voluntary
Termination or Retirement.  If
Optionee’s Employment is terminated voluntarily by Optionee or terminated for
Retirement, then (i) the non-vested portion of the Option shall immediately
expire on the termination date and (ii) the vested portion of the Option shall
expire to the extent not previously exercised before the three (3) month
anniversary of the termination date.  In
no event may the Option be exercised by anyone after the earlier of (i) the
expiration of the Option Period or (ii) three (3) months from the termination
date.


 


(c)                                  Death or Disability.  If Optionee’s Employment is terminated by
death or Disability (as defined in the Plan at the time of such termination),
then (i) the non-vested portion of the Option shall become fully vested on the
date of termination of Employment and (ii) the Option shall expire on the one (1)
year anniversary date of the termination of Employment (to the extent not
exercised by Optionee) or, in the case of death, by the person or persons to
whom Optionee’s rights under the Option have passed by will or by 


 


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the laws of descent and distribution or, in
the case of Disability, by Optionee or Optionee’s legal representative.  In no event may the Option be exercised by
anyone on or after the earlier of (i) the expiration of the Option Period or (ii)
one (1) year after the date of Optionee’s death or termination of Employment
due to Disability.


 


(d)                                 Other
Involuntary Termination.  If
Optionee’s Employment is terminated for any reason other than for Cause,
Retirement, death, Disability, or voluntary termination, then (i) the
non-vested portion of the Option shall become fully vested on the date of
termination of Employment and (ii) the Option shall expire to the extent not
exercised within three (3) months after such termination date.  In no event may the Option be exercised by
anyone after the earlier of (i) the expiration of the Option Period or (ii) three
(3) months after the termination of Employment date.  The termination of Employment of Optionee due
to or as a result of the termination or expiration of the Co-Employer
Agreement, dated July 11, 2008, by and between the Company and Torch Energy
Advisors Incorporated shall be considered an involuntary termination of
Optionee’s Employment for purposes of this Agreement.


 


10.                               Qualification
as an Incentive Stock Option. 
The Optionee understands that the Option is intended to qualify as an “incentive
stock option” within the meaning of Code Section 422.  The Optionee must meet certain holding
periods under Code Section 422(a) to obtain the federal income tax treatment
applicable to the exercise of incentive stock options and the disposition of
shares acquired thereby.  The Optionee
further understands that the exercise price of Shares subject to the Option has
been set by the Committee at a price that the Committee determined to be not
less than 100% (or, if the Optionee, at the Grant Date, owned more than 10% of
the total combined voting power of the Company’s outstanding voting securities,
110%) of the Fair Market Value, as determined in accordance with the Plan, of a
share of Common Stock on the Grant Date. 
The Optionee further understands and agrees that the Company shall not
be liable or responsible for any additional tax liability incurred by the
Optionee in the event that the Internal Revenue Service for any reason
determines that this Option does not qualify as an “incentive stock option”
within the meaning of the Code.


 


11.                               Disqualifying
Disposition.  In the event that Shares acquired upon
exercise of the Option are disposed of by Optionee in a “Disqualifying
Disposition,” Optionee shall notify the Company in writing within thirty (30)
days after such disposition of the date and terms of such disposition.  For purposes hereof, “Disqualifying
Disposition” means a disposition of Shares that are acquired upon the exercise
of the Option prior to the expiration of either two (2) years from the Grant
Date or one (1) year from the transfer date of Shares to Optionee pursuant to
the exercise of the Option.


 


12.                               Independent
Legal and Tax Advice.  Optionee acknowledges that the Company has
advised Optionee to obtain independent legal and tax advice regarding the grant
and exercise of the Option and the disposition of any Shares acquired thereby.


 


13.                               Reorganization
of Company.  The
existence of the Option shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in Company’s capital
structure or 


 


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its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Shares or the rights thereof, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.


 


14.                               Adjustment
of Shares.  In the event of
stock dividends, spin-offs of assets or other extraordinary dividends, stock
splits, combinations of shares, recapitalizations, mergers, consolidations,
reorganizations, liquidations, issuances of rights or warrants and similar
transactions or events involving Company, appropriate adjustments shall be made
to the terms and provisions of the Option as provided in the Plan.


 


15.                               No
Rights in Shares.  Optionee shall
have no rights as a shareholder in respect of the Shares until the Optionee
becomes the record holder of such Shares.


 


16.                               Investment
Representation.  Optionee will
enter into such written representations, warranties and agreements as Company
may reasonably request in order to comply with any federal or state securities
law.  Moreover, any stock certificate for
any Shares issued to Optionee hereunder may contain a legend restricting their
transferability as determined by the Company in its discretion.  Optionee agrees that Company shall not be
obligated to take any affirmative action in order to cause the issuance or
transfer of Shares hereunder to comply with any law, rule or regulation that
applies to the Shares subject to the Option.


 


17.                               No
Guarantee of Employment.  The Option shall not confer upon Optionee any
right to continued Employment with the Company or any subsidiary thereof.


 


18.                               Withholding
of Taxes.  The Company
shall have the right to (a) make deductions from the number of Shares otherwise
deliverable upon exercise of the Option in an amount sufficient to satisfy
withholding of any federal, state or local taxes required by law, or (b) take
such other action as may be necessary or appropriate to satisfy any such tax
withholding obligations.


 


19.                               General.


 


(a)                                  Notices.  All notices under this Agreement shall be
mailed or delivered by hand to the parties at their respective addresses set
forth beneath their signatures below or at such other address as may be
designated in writing by either of the parties to one another.  Notices shall be effective upon receipt.


 


(b)                                 Shares Reserved.  The Company shall at all times during the
Option Period reserve and keep available under the Plan such number of Shares
as shall be sufficient to satisfy the requirements of this Option.


 


(c)                                  Transferability
of Option.  The Option
granted pursuant to this Agreement is not transferable other than by will or by
the laws of descent and distribution or by a qualified domestic relations order
(as defined in Section 414(p) of the Internal Revenue Code).  The Option will be exercisable during
Optionee’s lifetime only by Optionee or by 


 


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Optionee’s legal representative in the event
of Optionee’s Disability.  No right or
benefit hereunder shall in any manner be liable for or subject to any debts,
contracts, liabilities, obligations or torts of Optionee.


 


(d)                                 Amendment and
Termination.  No
amendment, modification or termination of the Option or this Agreement shall be
made at any time without the written consent of Optionee and Company.


 


(e)                                  No Guarantee of
Tax Consequences.  The Company
and the Committee make no commitment or guarantee that any federal or state tax
treatment will apply or be available to any person eligible for benefits under
the Option.  The Optionee has been
advised and been provided the opportunity to obtain independent legal and tax advice
regarding the grant and exercise of the Option and the disposition of any
Shares acquired thereby.


 


(f)                                    Severability.  In the event that any provision of this
Agreement shall be held illegal, invalid, or unenforceable for any reason, such
provision shall be fully severable, but shall not affect the remaining
provisions of the Agreement, and the Agreement shall be construed and enforced
as if the illegal, invalid, or unenforceable provision had not been included
herein.


 


(g)                                 Supersedes
Prior Agreements.  This
Agreement shall supersede and replace all prior agreements and understandings,
oral or written, between the Company and the Optionee regarding the grant of
the Options covered hereby.


 


(h)                                 Governing Law.  The Option shall be construed in accordance
with the laws of the State of Texas without regard to its conflict of law
provisions, to the extent federal law does not supersede and preempt Texas law.


 


20.                               Definitions
and Other Terms.  The following
capitalized terms shall have those meanings set forth opposite them:


 


	
   

  	
   (a)

  	
  Optionee                                                                       Dennis
  Hammond

  
	
   

  	
   

  	
   

  
	
   

  	
   (b)

  	
  Grant Date:                                                            July 17, 2008

  
	
   

  	
   

  	
   

  
	
   

  	
   (c)

  	
  Shares:                                                                                 One Hundred
  Sixteen Thousand Five Hundred Fifty (116,550) Shares of the Company’s Common
  Stock.

  
	
   

  	
   

  	
   

  
	
   

  	
   (d)

  	
  Option Price:                                                   £1.30 per
  Share.

  
	
   

  	
   

  	
   

  
	
   

  	
   (e)

  	
  Option Period:                                           July 17, 2008
  through July 17, 2016 (until 5:00 p.m. CST).

  



 


(f)    Vesting Schedule:                                                Options covered
by this Option Agreement shall become vested, provided that, subject to Section
9, Optionee is then, and continuously


 


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from the Grant Date has been, an Employee of
the Company, in accordance with the following schedule:


 


	
   

  	
  Vesting Date

  	
   

  	
  Vested %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  First Anniversary of the
  Grant Date

  	
   

  	
  331/3

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Second Anniversary of the
  Grant Date

  	
   

  	
  331/3

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Third Anniversary of the
  Grant Date

  	
   

  	
  331/3

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total

  	
   

  	
  100

  	
  %

  	
   

  	
   

  



 


Notwithstanding the above vesting schedule, in the event of a “Change
in Control” of the Company (as defined in the Plan at the time of such event),
the entire non-vested portion of the Option, if any, shall immediately become
100% vested as of the Change in Control date.


 


[Signature
Page Follows.]


 


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IN WITNESS
WHEREOF, the Company, as of the Grant Date, has caused this Agreement to be
executed on its behalf by its duly authorized officer and Optionee has hereunto
executed this Agreement as of the same date.


 


	
   

  	
  RESACA EXPLOITATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Lendrum, III

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John
  J. Lendrum, III

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  
	
   

  	
  Resaca
  Exploitation, Inc.

  
	
   

  	
  1331
  Lamar Street, Suite 1450

  
	
   

  	
  Houston,
  Texas 77010

  
	
   

  	
  Attn:  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Dennis Hammond

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



 


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